The COVID-19 pandemic has placed stress levels on the housing market that have not been witnessed since the Great Recession. But one area of strength that has kept the industry viable during the ongoing crisis is the working rapport between lenders and appraisers.
“It appears that the relationship overall has been pretty good,” said Jeff Hogan, vice president of valuations at Veros Real Estate Solutions in Santa Ana, California. “And when I say that, I mean it appears they are communicating and working together in this very difficult challenging time that we’re in. It’s required a lot more communication than probably ever before, but it appears that the appraisers and the lenders are trying to work together to continue the lending process for people that need home loans.”
For the most part, state and local governments have not impeded the appraisers’ mission.
“Most stay-at-home orders identify appraisers as essential workers,” said Bill Garber, director of government and external relations at The Appraisal Institute. “Appraisers are able to do their work for the lenders in need of their services.”
But that’s not to say that lenders have been unaware of the new health challenges that appraisers face in their duties.
“It was a very big question about three weeks ago on how we are going to be able to close the pipeline if we cannot get the house appraised,” said Michael Dubeck, president and CEO at Planet Home Lending in Melville, New York. “Would the borrower let the appraiser in? Can we have notarization and everything that happens face-to-face in the process?”
Dubeck observed that one tenet driving the current economic meltdown was a lesson learned from the last economic meltdown.
“I think there is one silver lining to the credit crisis of 2008: all the agencies, the regulators and industry participants have really learned to shift gears quickly and adapt to changing circumstances,” he stated. “I think the agencies did a great job quickly adopting solutions that avoid face-to-face contact.”
Dubeck referred to a series of temporary policy shifts by the government-sponsored enterprises and the federal home lending programs to accommodate COVID-19 safety concerns by allowing exterior-only appraisals (also known as drive-by appraisals) and desktop appraisals (which rely on public records, multiple listing service information and other third-party data sources rather than property inspection) in lieu of on-site inspections.
Jeremy Sopko, co-founder and CEO of Nations Lending in Independence, Ohio, noted his company has no problems with the new agency flexibilities.
“At present, we’ve not felt too much difficulty with appraisers expressing concerns, and in many cases the reports are completed with no issues,” he said. “We are accepting pictures from homeowners in the case of repair work to be done, as opposed to requiring the typical completion certification.”
Sopko also pointed out the recent expansions of the Property Inspection Waiver (PIW) offerings from Fannie Mae and Freddie Mac, adding that “we are seeing that appraisals are not required on many more of our transactions.”
Still, the federal response has also raised some grumblings from the appraisers. The Appraisal Institute’s Bill Garber stated the Federal Housing Finance Agency did not extend drive-by and desktop appraisals to non-GSE refinance applications.
“This creates concerns on multiple levels,” Garber said. “They are forcing appraisers to interact in a manner that public health officials say is not ideal. The FHFA does not want to see the transfer of risk onto the Fannie and Freddie balance sheets at the time when they are trying to release them from conservatorship.”
And appraisers are willing to push back if they consider the property inspection to be unsafe for their health.
“First of all, appraisers are independent contractors,” said Brian Zitin, co-founder and CEO of Reggora, a Boston-headquartered appraisal software company. “You can’t force them to do anything, and you can’t reprimand them in that regard. But it depends on the lender. Some of them are trying to find if an appraiser is willing to do it, then they’ll send them the order. If no appraisers are willing to do it, that order may be placed on hold or they’ll see what they can do in terms of an exterior appraisal, or a desktop.”
Sean Pyle, president of ValuTrust Solutions in Overland Park, Kansas, pointed out that the vast majority of borrowers and homeowners are trying to find ways to “mitigate concerns by turning on lights, opening doors, and trying to create an environment where an appraiser doesn’t need to touch anything in a house and can keep a safe distance from any other person that might dwell in that house. But at any point, if a borrower or an appraiser doesn’t feel comfortable, they’re well within their rights to either postpone that or cancel it or do whatever they feel is necessary for their own safety.”
Tom Dolfay, CEO of Property Damage Appraisers in Fort Worth, Texas, acknowledged that his workforce is constantly dealing with this issue.
“The challenge is getting inside and it’s become an issue,” he said. “I think people are as concerned about having one of our appraisers in their home as the appraiser is going inside their homes. With one of the tenants we’ve talked with, the options included getting our guys masks and uniforms. By this point, what ends up happening in a lot of cases is we just asked the tenant to do either a high-end video or take photos of the inside and then we’ll go from there. It’s almost like doing a photo op while we’re able to work on the outside.”